Prevention of grey economy

Prevention of non-observed economic activity, or the grey economy, is one of the government’s flagship projects. The Ministry of Employment and the Economy is responsible for measures related to the grey economy in labour-intensive sectors and the reform of the Act on the Contractor’s Obligations and Liability when Work is Contracted Out.

Labour-intensive sectors include the construction industry, hospitality and catering, the transport sector, cleaning and maintenance, hairdressing, beauty care services, and the private social and health care sector. Of these, the measures by the Ministry of Employment and the Economy are related in particular to the construction industry, hospitality and catering, and hairdressing.

Prevention of grey economy activities will not only increase tax revenue but also support lawful entrepreneurship, safeguard fair competition between companies, and support employment. In addition to the authorities, prevention of the grey economy also requires active participation by customers and employees alike.

The government issued a resolution on a programme to step up its activities to tackle non-observed economic activity and economic crime on 19 January 2012. Implemented in 2012–2015, the programme comprises 22 projects steered by a number of ministries and authorities. A link to the resolution can be found on the right-hand side of this page.

The Ministry of Employment and the Economy measures:

Reform of the Act on the Contractor’s Obligations and Liability when Work is Contracted Out

A working group will examine the reform needs of, and prepare the required amendments to, the Act on the Contractor’s Obligations and Liability when Work is Contracted Out. The Ministry of Employment and the Economy will also look into improving the availability of register data needed in the prevention of grey economy activities in order for businesses to access information gathered by the authorities more easily and, possibly, free of charge.
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New act on the obligation to provide a receipt

The introduction of an act on the obligation to provide a receipt would mean that, in future, businesses will have to provide their customers with receipts for all products and services sold. The submission of the legislative proposal to Parliament is planned for early 2013.
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Ban on cash wages

The possibilities for legislation mandating that wages for business activities must be paid in to the employee’s bank account or as a money order from the employer’s bank will be investigated. It is intended that the proposal will be submitted to Parliament during 2012.

Type-approved cash registers and wider application of working time monitoring

The Ministry of Employment and the Economy, together with the Tax Administration, will investigate the prevalence of the manipulation of cash registers in the hospitality and catering industry and the possibilities for tackling non-registered sales. The need for similar legislation and application in other cash-based trades will be investigated. The necessary provisions on the obligation to use type-approved cash registers will be prepared on the basis of the investigation. The investigation will be carried out during 2013. A joint survey with the Tax Administration will be carried out to determine whether the current system of monitoring working time could help prevent non-observed economic activity.

Reform of the Act on Public Contracts

Regulation of public procurement is currently under reform in the EU. Under the proposals for an EU directive, tenderers who have neglected to pay taxes and other statutory fees should always be excluded from the tendering process, to promote contractors' liability. The contracting authority should also ascertain that an exceptionally low tender price does not stem from the relevant tenderer’s non-payment of taxes and other fees.

Amendments to the Act on the Contractor’s Obligations and Liability when Work is Contracted Out and the Act on Public Contracts in relation to the construction industry

These amendments came into force on 1 September 2012. In accordance with the amendments, a contractor in the construction industry shall, in future, request accounts and certificates from the subcontractor in accordance with said act, even if the operations of the contract partner are established. A certificate of accident insurance has been added to the list of items to be clarified. The efficiency of law enforcement has been improved through the adoption of a higher negligence fine for more serious transgressions. This penalty is between 16,000 and 50,000 euros. In addition, to promote contractors’ liability in the public sector, a clause has been added to the Act on Public Contracts on compliance by all public sector construction contracts with the minimum terms of employment set forth in the employment contract.

Press release 31 August 2012: Expansion of Contractor Obligations and Liability and Introduction of Individual Tax Numbers on 1 September

Tackling the grey economy in the hairdressing and beauty care sector

In January 2012, the Ministry of Employment and the Economy appointed a working group to prepare the measures necessary for tackling non-registered sales specifically. The working group’s term of office ended on 29 June 2012.

Press release 3 July 2012: Working group: Obligation to provide a receipt would combat grey economy in the beauty care sector

Extensive co-operation

In accordance with the decision-in-principle, the Ministry of Finance, the Ministry of the Interior, the Ministry of Justice, the Ministry of Social Affairs and Health, the Ministry of the Environment, the Tax Administration, the Office of the Bankruptcy Ombudsman, the Office of the Prosecutor General, the National Police Board, the National Board of Customs, and the National Administrative Office for Enforcement will also take part in prevention of grey-economy activities.